Appendix 4D Half year report Period ended 30 June 2017 Rule 4.2A.3 Appendix 4D Mitula Group Limited ABN 82 604 677 796 Results for announcement to the market Half year report Period ended 30 June 2017 (Previous corresponding period: 6-month period ended 30 June 2016) 30 Jun 2017 % Change from 6 months ended 30 Jun 2016 A$'000 30 Jun 2016 A$'000 Revenue from ordinary activities Up 15,713.6 15.7% 13,586.7 Profit from ordinary activities after tax attributable to members Down 2,558.8 (45.4)% 4,686.3 Profit for the period attributable to members Down 2,558.8 (45.4)% 4,686.3 Dividend information The Group is not proposing to pay dividends Explanatory Notes 1. For explanation of the figures reported above or other item(s) of importance not previously released to the market, please refer to the attached Interim Financial Report (which incorporates the Directors Report and Financial Statements) for explanations. Appendix 4D Page 1 2151229_031.doc
Appendix 4D Half year report Period ending 30 June 2017 Net tangible assets per ordinary security Current period Previous corresponding period to 30/06/16 Net tangible assets 13,532,825 23,921,286 Net assets 52,298,606 37,726,093 Issued share capital at reporting date 33,086,776 27,309,279 Number of shares on issue at reporting date 214,233,142 208,819,201 Net tangible assets per ordinary security 0.06 0.11 Net assets per ordinary security 0.24 0.18 Acquisitions and divestments On the 2 nd of March 2017, Mitula Group acquired 100% of the issued share capital of Kleding BV, a company in the Netherlands. The total purchase consideration was approximately $15.0 million ( 10.9 million) and it was primarily funded by cash reserves ($13.7 million) as well as the issue of 1.0 million new shares in Mitula Group Limited. At acquisition, Kleding BV operated 16 fashion vertical search sites under the Kleding.nl brand in the Netherlands and the Fashiola brand in Denmark, Australia, United Kingdom, Germany, Austria, Sweden, France, Poland, Italy, Switzerland, Brazil, Spain, Portugal and Belgium (French and Dutch sites). These sites aggregate over 18 million products from over 1,000 different online stores across men s and women s clothes, shoes and accessories. Visitors to these sites select an item they are interested in and then click out to the originating online store. These click outs are monetised on a cost per acquisition bases whereby Kleding BV receives a percentage of the total spend by the user on the destination site during the first 30 days from the click out. The Kleding.nl and Fashiola sites also provide display advertising opportunities for fashion brands to reach their highly targeted and relevant audience. Profit contribution of Kleding is $458,296 from the date of incorporation into the Mitula Group (4 months starting in March 2017). Accounting Standards The financial report has been prepared in accordance with AASB134 Interim Financial Reporting and the Corporations Act 2001. This report is based on the consolidated interim Financial Report for the 6-month period ended 30 June 2017 which has been reviewed by PricewaterhouseCoopers with the Independent Auditor s Review Report included in the Interim Financial Report. Appendix 4D Page 2
ACN 604 677 796 INTERIM FINANCIAL REPORT FOR THE HALF YEAR ENDED 30 JUNE 2017
Interim Financial Report for the half year ended 30 June 2017 Contents Page Directors Report 2 Auditor s Independence Declaration 6 Consolidated Statement of Comprehensive Income 7 Consolidated Balance Sheet 8 Consolidated Statement of Changes in Equity 9 Consolidated Statement of Cash Flows 10 Notes to the Consolidated Interim Financial Report 1. Basis of preparation of interim report 11 2. Critical accounting estimates and judgements 12 3. Financial risk management and financial instruments 13 4. Subsidiaries 14 5. Financial assets 15 6. Property, plant and equipment 16 7. Intangible assets 17 8. Segment information 18 9. Income tax 20 10. Business combinations 20 11. Reserves 22 12. Contributed equity 22 13. Dividends 23 14. Earnings per share 23 15. Contingencies 24 16. Events occurring after the reporting period 24 Directors Declaration 25 Independent Auditor s Review Report 26 1
Director s Report The Directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of Mitula Group Limited ( the Company ) and its controlled entities ( the Group ), for the half year ended 30 June 2017 and the Auditor s Review Report. Directors The following persons were directors of Mitula Group Limited during the half year and up to the date of this report: Simon Baker Independent Non-Executive Chairman Gonzalo del Pozo Chief Executive Officer and Executive Director Gonzalo Ortiz Non-Executive Director Joseph Hanna Independent Non-Executive Director Sol Wise Independent Non-Executive Director Georg Chmiel Independent Non-Executive Director (Appointed 18 January 2017) Non-IFRS financial information Through this report the Group has included certain non-ifrs financial information. This information is presented to assist in making appropriate comparisons with prior periods and to assess the operating performance of the business. The Group uses these measures to assess performance of the business and believes that this information would be useful for investors. Terms used in this Report The following terms, when used in this Directors report, have these meanings: EBITDA: earnings before interest, tax, depreciation, amortisation and foreign exchange differences. EBT: Earnings before taxes, equivalent to Profit before tax. NPAT: Net profit after tax, equivalent to Profit after tax. Review of Operations $' 000 30 June 2017 30 June 2016 Variance Revenue 15,714 13,587 15.7% - AMERICAS 3,482 3,486 (0.1)% - APAC 3,836 2,777 38.1% - EMEA 8,396 7,324 14.6% Operating expenses (10,309) (7,022) 46.8% EBITDA 1 5,405 6,565 (17.7)% EBITDA margin 34,4% 48.3% (28.8)% Net cash flow from operations 4,907 6,072 (19.2)% Cash balance (end of period) 10,877 22,239 (51.1)% 1 Management believe additional non-ifrs financial information (EBITDA) is useful in measuring the performance of the Group. See below reconciliation statements to EBITDA and operating expenses. 2
Director s Report Reconciliation Profit before tax to EBITDA $' 000 30 June 2017 30 June 2016 Profit before tax 3,598 5,985 Depreciation & amortisation 1,107 798 Net finance (Income) / expense (22) (178) Net foreign exchange (gains) / losses 722 (40) Earnings before interest, tax, depreciation and amortization and foreign exchange differences 5,405 6,565 Reconciliation of Operating Expenses: $' 000 30 June 2017 30 June 2016 Cost of sales (3,373) (1,690) Employee benefit expenses (3,993) (3,649) Other operating expenses (978) (469) Technology expenses (887) (480) Office expenses (558) (382) Corporate expenses (519) (353) Rounding (1) 1 Operating expenses (10,309) (7,022) First half revenues increased by 15.7 percent over the previous corresponding period. This was less than expected due to a configuration error incurred by the business during the period. The configuration error caused pages from the Mitula branded sites to be served slower than they should be. This resulted in Google penalizing these sites leading to less than expected organic search traffic. The end result was less than forecast AdSense and CPC revenues leading to lower than expected year on year revenue growth. This configuration error has been corrected and traffic is returning to normal. It is expected that this will occur before the end of the year. EBITDA decreased by 17.7% over the previous corresponding period. This was primarily driven by the decrease in revenues attributed to the configuration error. In addition, the business has been aggressively investing in implementing its Closer to the Transaction strategy that is expected to deliver strong revenue growth over the coming years. Cash reserves decreased during the period from $20.5 million to $10.9 million. This was primarily due to the acquisition of Kelding BV on the 2 nd March 2017. The company generated $4.9 million in net cash flow from operations over the period. This was a decrease from $6.1 million in net cash flow in the previous corresponding period and directly related to the loss in revenue from the configuration error incurred by the business during the period. 3
Director s Report Significant Changes in State of Affairs Business combination Fashiola On the 2 nd of March 2017, Mitula Group acquired 100% of the issued share capital of Kleding BV, a company in the Netherlands. The total purchase consideration was approximately $15.0 million ( 10.9 million) and it was primarily funded by cash reserves ($13.7 million) as well as the issue of 1.0 million new shares in Mitula Group Limited. At acquisition, Kleding BV operated 16 fashion vertical search sites under the Kleding.nl brand in the Netherlands and the Fashiola brand in Denmark, Australia, United Kingdom, Germany, Austria, Sweden, France, Poland, Italy, Switzerland, Brazil, Spain, Portugal and Belgium (French and Dutch sites). These sites aggregate over 18 million products from over 1,000 different online stores across men s and women s clothes, shoes and accessories. Visitors to these sites select an item they are interested in and then click out to the originating online store. These click outs are monetised on a cost per acquisition bases whereby Kleding BV receives a percentage of the total spend by the user on the destination site during the first 30 days from the click out. The Kleding.nl and Fashiola sites also provide display advertising opportunities for fashion brands to reach their highly targeted and relevant audience. Profit contribution of Kleding is $458,296 from the date of incorporation into the Mitula Group (4 months starting in March 2017). Reforecast expected financial results On the 25 th July 2017, the Board updated it 2017 financial forecast. Revenues are now expected to be between $34.0 million and $36.0 million, down from between $38.0 million and $41.0 million. In addition, EBITDA is expected to be between $12.0 million and $13.0 million, down from between $17.0 million and $19.0 million. Dividends The Company is not proposing to pay dividends. There are no dividend or distribution reinvestment plans in operation. Subsequent events There were no subsequent events after the reporting period occurred. Auditor s Independence Declaration A copy of the auditor s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 6. Rounding of amounts The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Director`s Reports) Instrument 2017/191, issued by the Australian Securities and Investments Commission, relating to the rounding off of amounts in the Directors Report. Amounts in the Directors Report and Financial Report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. 4
Director s Report The Directors Report is made in accordance with a resolution of directors. Simon Baker Chairman Dated this 9 th August 2017 5
Auditor s Independence Declaration As lead auditor for the review of Mitula Group Limited for the half-year ended 30 June 2017, I declare that to the best of my knowledge and belief, there have been: (a) (b) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and no contraventions of any applicable code of professional conduct in relation to the review. This declaration is in respect of Mitula Group Limited and the entities it controlled during the period Jon Roberts Partner PricewaterhouseCoopers Melbourne 9 August 2017 PricewaterhouseCoopers, ABN 52 780 433 757 2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation.
Consolidated statement of comprehensive income Notes 30 June 30 June 2017 2016 $ $ Revenue 8 15,713,570 13,586,661 Cost of sales 8 (3,373,169) (1,689,952) Gross profit 12,340,401 11,896,709 Employee benefit expenses (3,993,067) (3,648,622) Operating expenses (977,687) (468,853) Technology expenses (887,311) (479,779) Office expenses (557,786) (381,818) Corporate expenses (519,115) (352,636) Earnings before interest, tax, depreciation and amortization and foreign exchange differences 5,405,435 6,565,001 Depreciation and amortisation expense (1,107,110) (798,382) Net finance income 21,594 177,960 Net exchange rates differences (721,946) 40,028 Profit before income tax 3,597,973 5,984,607 Income tax expense 9 (1,039,170) (1,298,327) Profit for the half year 2,558,803 4,686,280 Items that may be reclassified to profit or loss Exchange differences on translation of foreign operations 172,202 (345,510) Other comprehensive income for the period 172,202 (345,510) Total comprehensive income for the period 2,731,005 4,340,770 Total comprehensive income attributable to owners 2,731,005 4,340,770 Earnings per share for profit attributable to the ordinary equity holders of the company: Cents Cents Basic earnings per share 14 1.20 2.24 Diluted earnings per share 14 1.18 2.21 The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 7
Consolidated balance sheet As at 30 June 2017 Notes 30 June 2017 31 December 2016 $ $ ASSETS Current Assets Cash and cash equivalents 10,876,909 20,462,205 Trade and other receivables 6,593,013 5,468,174 Current tax assets 172,602 210,387 Other current assets 5,152 15,670 Total current assets 17,647,676 26,156,436 Non-current assets Property, plant and equipment 6 810,177 899,577 Goodwill 7 32,662,196 18,952,676 Other intangible assets 7 6,103,585 6,261,162 Other non-current financial assets 5 551,878 547,956 Deferred income tax asset 118,749 201,780 Total non-current assets 40,246,585 26,863,151 Total assets 57,894,261 53,019,587 LIABILITIES Current liabilities Trade and other payables 2,675,268 1,478,790 Current tax liabilities 1,116,001 500,506 Total current liabilities 3,791,269 1,979,296 Non-current liabilities Other liabilities 5 337,328 351,739 Deferred tax liability 1,467,058 1,795,366 Total non-current liabilities 1,804,386 2,147,105 Total liabilities 5,595,655 4,126,401 Net assets 52,298,606 48,893,186 EQUITY Contributed equity 12 33,086,776 32,136,903 Other equity 11 2,605,706 2,605,706 Reserves 11 1,328,077 1,603,535 Retained earnings 11 15,472,795 12,913,992 Foreign currency translation reserve (194,748) (366,950) Total equity 52,298,606 48,893,186 The above consolidated balance sheet should be read in conjunction with the accompanying notes. 8
Consolidated statement of changes in equity Consolidated entity Notes Contributed Other Retained Translation Total equity equity Reserves earnings differences equity $ $ $ $ $ $ Balance at 1 January 2016 27,230,212-574,000 4,740,269 187,775 32,732,256 Profit for the period - - - 8,173,723-8,173,723 Other comprehensive income - - - - (554,725) (554,725) Total comprehensive income for the period - - - 8,173,723 (554,725) 7,618,998 Transactions with owners in their capacity as owners: Issue of new shares 4,906,691 - - - - 4,906,691 Share-based payments - - 1,029,535 - - 1,029,535 Shares granted on business acquisition yet to be issued - 2,605,706 - - - 2,605,706 Balance at 31 December 2016 32,136,903 2,605,706 1,603,535 12,913,992 (366,950) 48,893,186 Balance at 1 January 2017 32,136,903 2,605,706 1,603,535 12,913,992 (366,950) 48,893,186 Profit for the period - - - 2,558,803-2,558,803 Other comprehensive income - - - - 172,202 172,202 Total comprehensive income for the period - - - 2,558,803 172,202 2,731,005 Transactions with owners in their capacity as owners: Issue of new shares 12 890,000 - - - - 890,000 Share-based payments 59,873 - (275,458) - - (215,585) Other movements in Equity 12 - - - - - - Balance at 30 June 2017 33,086,776 2,605,706 1,328,077 15,472,795 (194,748) 52,298,606 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 9
Consolidated statement of cash flows 30 June 2017 30 June 2016 Notes $ $ Cash flows from operating activities Receipts from customers (inclusive of goods and service tax) 16,989,354 13,182,223 Payments to suppliers and employees (inclusive of goods and service tax) (11,297,962) (6,838,664) 5,691,392 6,343,559 Cost associated with acquisition of subsidiary 10.1 (117,105) (63,648) Income tax paid (688,927) (386,334) Interest paid - (13,958) Interest received 21,594 191,918 Net cash flows from operating activities 4,906,954 6,071,537 Cash flows from investing activities Payment for acquisition of subsidiary, net of cash acquired 10.1 (13,649,477) (2,620,528) Payments for other financial assets 5 (15,884) (4,051) Payments for property, plant and equipment 6 (66,942) (251,796) Payments for other intangibles 7 (759,947) (89,972) Net cash flows from investing activities (14,492,250) (2,966,347) Cash flows from financing activities Payment of Borrowings - (1,868,797) Net cash flows from financing activities - (1,868,797) Net increase / (decrease) in cash and cash equivalents (9,585,296) 1,236,393 Cash and cash equivalents at the beginning of the half year 20,462,205 21,002,933 Cash and cash equivalents at end of the half year 10,876,909 22,239,326 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 10
Notes to the consolidated financial statements 1. Basis of preparation of interim report This interim financial report for the 6-month period ended 30 June 2017 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001. The interim financial report has been prepared on a historical cost basis, except for financial assets at fair value through profit or loss which are measured at fair value. The accounting policies applied by the consolidated entity in this interim financial report are consistent with those applied in the annual report for the year ended 31 December 2016. 1.1. Impact of standards issued but not yet applied by the entity Certain new accounting standards and interpretations have been published that are not mandatory for the 6-month period ended 30 June 2017 and have not yet been applied in the interim financial statements: Title of Standard AASB 9 Financial Instruments Summary and impact on Group's financial statements AASB 9 Financial Instruments replaces AASB 139 and addresses and classification, measurement and derecognition of financial assets and liabilities. It also addresses the new hedge accounting requirements, including changes to hedge effectiveness, treatment of hedging costs and risk components that can be hedged. AASB 9 introduces a new expected loss model impairment model that will require entities to account for expected credit losses at the time of recognising the asset. The Group does not expect the adoption of the new standard to have a material impact on its classification and measurement of the financial assets and liabilities or its results on adoption of the new impairment model. The new standard will result in extended disclosures in the financial statements. The Group has decided not to early adopt AASB 9. Application date of the standard 1 January 2018 Application date for Group for financial year ending 31 December 2018 Title of Standard AASB 15 Revenue from Contracts with Customers Summary and impact on Group's financial statements AASB 15 provides a single, principles based five-step model to be applied to all contracts with customers. The five steps in the model are as follows: 1. identify contracts with customers Application date of the standard 1 January 2018 Application date for Group for financial year ending 31 December 2018 11
Notes to the consolidated financial statements 2. identify the separate performance obligations 3. determine the transaction price of the contract 4. allocate the transaction price to each of the separate performance obligations, and 5. recognise the revenue as each performance obligation is satisfied. Guidance is provided on topics such as the point in which revenue is recognised, accounting for variable consideration, costs of fulfilling and obtaining a contract and various related matters. The Group is assessing the impact of the new standard on its revenue recognition policy and is not expected to have a material impact in the financial statements. AASB 16 Leases AASB 16 was issued in February 2016. It will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases. 1 January 2019 31 December 2019 The accounting for lessors will not significantly change. The standard will affect primarily the accounting for the Group s operating leases. As at the reporting date, the Group has non-cancellable operating lease commitments of $198,918. However, the Group has not yet determined to what extent these commitments will result in the recognition of an asset and a liability for future payments and how this will affect the Group s profit and classification of cash flows. Some of the commitments may be covered by the exception for short-term and low-value leases and some commitments may relate to arrangements that will not qualify as leases under AASB 16. Mandatory for financial years commencing on or after 1 January 2019. At this stage, the Group does not intend to adopt the standard before its effective date. 2. Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (i) Estimated impairment of goodwill 12
Notes to the consolidated financial statements The Group tests annually whether goodwill has suffered any impairment. The recoverable amounts of cash- generating units (CGUs) are determined based on value-in-use calculations. These calculations require the use of assumptions for each CGU. (ii) Income taxes The Group is subject to income taxes (and other similar taxes) in Australia and in a number of overseas jurisdictions. Judgement is required in determining the Group provision for income taxes. There are certain transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group estimates its tax liabilities based on the Group's understanding of the tax law. Where the final outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. 3. Financial risk management and financial instruments 3.1 Financial risk factors The Group s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements. There have been no changes in the risk management department or in any risk management policies since the year end. 3.2 Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. At the end of the reporting period the Group is in a net current asset position of $13.9 million. Management monitors rolling forecasts of the Group s liquidity and cash and cash equivalents on the basis of expected cash flows. This is generally carried out at local level in the operating companies of the Group in accordance with practice and limits set by the Group. These limits vary by location to take into account the liquidity of the market in which the entity operates. 3.3 Fair value measurement of financial instruments The Company generally uses, when available, market rates to determine the fair value price, and that data is classified as Level 1. If these rates are not available, the fair value is estimated using a standard valuation model. When applicable, these models project cash flows and discount the future amounts using observable data at its present value; incluiding interest rates, exchange rates, volatility, etc. The items evaluated using the previous data are classified in accordance with the lowest level of the data that is significant for the valuation. Therefore, an item could be classified as Level 3 even though some of its significant data are observable. During the period there were no transfers between levels 1 and 2 or 2 and 3. The Group does not have level 2 and level 3 financial assets or liabilities. 13
Notes to the consolidated financial statements The following table presents the Group s financial assets at fair value at 30 June 2017 and 31 December 2016: Note 30 June 2017 31 December 2016 $ $ Financial assets at fair value through profit or loss - Level 1 5 337,328 351,739 - Level 2 - - - Level 3 - - 337,328 351,739 The financial assets at fair value through profit or loss is the value of 98,683 shares of Only Apartments S.A., a Spanish company listed in MAB (Alternative Trade Market in Spain) whose quoted price at 30 June 2017 was $3.42 per share (31 December 2016: 3.56 per share). This financial asset was acquired as part of the Nuroa business combination. These shares are subject to an escrow agreement and cannot be sold in the short term. The amount obtained in the selling of these shares will be used to pay Nuroa vendors, conferring the Nuroa vendors the results of this operation and the changes in price suffered in the shares from the initial valuation, as a result there is recognized a liability of the same amount as Other liabilities 4. Subsidiaries At period end, the entities that constituted the Group are as follows: Company name Place of business or country of incorporation % Ownership interest held by the Group Activity Mitula Classified SL Spain 100% Vertical search website operator Lokku Limited U.K. 100% Vertical search website operator Mitula Group Pte Ltd Singapore 100% Vertical search website operator Mitula Classified China Limited Hong Kong 100% Without activity Nestoria UK Limited U.K. 100% Without activity Nestoria Spain SL Spain 100% Without activity Nestoria Brasil Buscador de Imoveris Ltda Nestoria India Property Search Services Private Limited Brazil 100% Vertical search website operator India 99.99% (*) Vertical search website operator Dot Property Pte Ltd Singapore 100% Property portal network Dot Property Co Ltd Thailand 100% Property portal network Dot Property Philippines Inc Philippines 100% Property portal network Kleding BV Netherlands 100% Vertical search website operator 14
Notes to the consolidated financial statements On the 2 nd of March 2017, Mitula Group acquired 100% of the issued share capital of Kleding BV, a company in the Netherlands. The total purchase consideration was approximately $15 million ( 10.9 million) and it was primarily funded by cash reserves ($13.7 million) as well as the issue of 1 million new shares in Mitula Group Limited. There is also a further earn out period of 10 months concluding on 31 December 2017 that may result in an additional payment being made if certain revenue and EBITDA targets are met. However, the Group does not expect those targets will be achieved (Note 10.1). 5. Financials Assets 30 June 31 December 2017 2016 $ $ Investments 1,462 1,462 Lease guarantee 213,088 194,755 Financial assets at fair value through profit or loss 337,328 351,739 551,878 547,956 Financial liabilities at fair value through profit or loss (337,328) (351,739) (337,328) (351,739) The lease guarantee is the deposit paid by the Group as guarantor to the lessor of the office that the Group has in Madrid (Spain). This office is leased under a non-cancellable operating leases expiring within five years. However, after three years the Group can cancel the lease with a 6 month notice period. The financial assets at fair value through profit or loss is the value of 98,683 shares of Only Apartments S.A., a Spanish company listed in MAB (Alternative Trade Market in Spain) whose quoted price at 30 June 2017 was $3.42 per share ( 2.30 per share). These shares are subject to an escrow agreement and cannot be sold until 2020. The amount obtained in the selling of these shares will be used to pay Nuroa vendors, confronting Nuroa vendors the results of this operation and the changes in price suffered in the shares from the initial valuation, so there is recognized a liability of the same amount as "Other liabilities". 15
Notes to the consolidated financial statements 6. Property, plant and equipment At 1 January 2016 Leasehold improvements Furniture, fittings and equipment Total $ $ $ Cost or fair value 231,816 1,094,989 1,326,805 Accumulated depreciation (11,443) (586,336) (597,779) Net book amount 220,373 508,653 729,026 Year ended 31 December 2016 Opening net book amount 220,373 508,653 729,026 Exchange differences (4,583) (9,984) (14,567) Acquisition of subsidiary - 71,371 71,371 Additions 6,553 420,087 426,640 Disposals (net of depreciation) - (8,354) (8,354) Depreciation charge (23,621) (280,918) (304,539) Closing net book amount 198,722 700,855 899,577 At 31 December 2016 Cost or fair value 233,786 1,497,448 1,731,234 Accumulated depreciation (35,064) (796,593) (831,657) Net book amount 198,722 700,855 899,577 Half Year ended 30 June 2017 Opening net book amount 198,722 700,855 899,577 Exchange differences 3,005 4,583 7,588 Acquisition of subsidiary - 9,135 9,135 Additions - 66,942 66,942 Disposals (net of depreciation) - (4,550) (4,550) Depreciation charge (11,449) (157,066) (168,515) Closing net book amount 190,278 619,899 810,177 At 30 June 2017 Cost or fair value 236,791 1,573,558 1,810,349 Accumulated depreciation (46,513) (953,659) (1,000,172) Net book amount 190,278 619,899 810,177 As of 30 June 2017, there are assets fully depreciated of $573,287 (31 December 2017: $199,488). 16
Notes to the consolidated financial statements 7. Intangible assets At 1 January 2016 Goodwill Customer relationships Trademarks and licenses Software and website development Total $ $ $ $ $ Cost or fair value 5,086,057 6,359,064 1,228 205,461 11,651,810 Accumulated amortisation and impairment - (847,875) - (33,509) (881,384) Net book amount 5,086,057 5,511,189 1,228 171,952 10,770,426 Year ended 31 December 2016 Opening net book amount 5,086,057 5,511,189 1,228 171,952 10,770,426 Exchange differences (89,354) - - (24,366) (113,720) Acquisition of business 13,955,973 1,082,556-952,643 15,991,172 Additions - - - 227,360 227,360 Amortisation charge - (1,452,239) - (209,161) (1,661,400) Closing net book amount 18,952,676 5,141,506 1,228 1,118,428 25,213,838 At 31 December 2016 Cost or fair value 18,952,676 7,441,620 1,228 1,361,098 27,756,622 Accumulated amortisation and impairment - (2,300,114) - (242,670) (2,542,784) Net book amount 18,952,676 5,141,506 1,228 1,118,428 25,213,838 Half Year ended 30 June 2017 Opening net book amount 18,952,676 5,141,506 1,228 1,118,428 25,213,838 Exchange differences 53,770 (28,695) - (19,421) 5,654 Acquisition of business 13,655,750 - - 69,187 13,724,937 Additions - 303,415-456,532 759,947 Amortisation charge - (788,028) - (150,567) (938,595) Closing net book amount 32,662,196 4,628,198 1,228 1,474,159 38,765,781 At 30 June 2017 Cost or fair value 32,662,196 7,716,340 1,228 1,867,396 42,247,161 Accumulated amortisation and impairment - (3,088,142) - (393,237) (3,481,380) Net book amount 32,662,196 4,628,198 1,228 1,474,159 38,765,781 Software and website development includes capitalised development costs amounting to $456,532 (31 December 2016: $110,473. These development costs are directly attributable to the design and implementation of identifiable and unique software products by the Group, which will generate probable future economic benefits. At 30 June 2017 these assets are classified as work in progress since they are not ready for use. The Group is expecting to amortise these development costs over 2 years. 17
Notes to the consolidated financial statements As of 30 June 2017, there are intangible assets fully amortized of $234,729 (31 December 2016: $0). Goodwill Goodwill relates to four separate acquisitions: 30 June 2017 31 December 2016 $ $ Goodwill Lokku 5,086,057 5,086,057 Goodwill Nuroa 1,965,910 1,932,674 Goodwill Dot Property Pte Limited 11,954,479 11,933,945 Goodwill Kleding BV 13,655,750 - Total Goodwill 32,662,196 18,952,676 The Dot Property Pte Limited and Kleding BV acquisitions occurred within the last 12 months of this report and the acquisition accounting and allocated goodwill remains preliminary. On finalization of acquisition accounting goodwill is allocated to the Group s three segments: Americas, EMEA and APAC. These segments are also considered to be the Group`s cash generating units ( CGU ). At 30 June 2017, there are no factors that indicate a possible impairment of goodwill s carrying value. 8. Segment information An operating segment is a component of the consolidated entity that engages in business activities from which it may earn revenue and incur expenses that relate to transactions with the consolidated entity's other components. The operating segment results are regularly reviewed by the Chief Executive Officer who provides strategic decision and management oversight of the day to day activities in terms of monitoring results, providing approval for capital expenditure and approving strategic planning for the business. (a) Description of segments The Group revenue is reported in three geographic segments: Americas, APAC and EMEA. The segments comprise of the following countries of operation: Americas comprising: Argentina, Brazil, Canada, Chile, Colombia, Ecuador, Mexico, Peru, USA, Venezuela and Panama. APAC comprising: Australia, China, Hong Kong, Indonesia, India, Malaysia, New Zealand, Pakistan, Philippines, Singapore, Thailand and Vietnam. EMEA comprising: Austria, Belgium, France, Germany, Ireland, Italy, Morocco, Netherlands, Poland, Portugal, Romania, Russia, South Africa, Spain, Switzerland, Turkey, United Kingdom, UAE, Denmark, Sweden, Kenya, Nigeria and Tunisia. 18
Notes to the consolidated financial statements (b) Segment information provided to senior management The segment information provided to senior management for the reportable segments for the 6- month period ended 30 June 2017 is as follows: Consolidated entity AMERICAS APAC EMEA Total 6-month period ended 30 June 2017 $ $ $ $ Total revenue 3,481,887 3,836,058 8,395,625 15,713,570 Cost of sales (346,722) (735,345) (2,291,102) (3,373,169) Gross profit 3,135,165 3,100,713 6,104,523 12,340,401 Gross profit percentage 90% 81% 73% 79% The segment information provided to senior management for the reportable segments for the 6-month period ended 30 June 2016 is as follows: Consolidated entity AMERICAS APAC EMEA Total 6-month period ended 30 June 2016 $ $ $ $ Total revenue 3,486,354 2,776,440 7,323,867 13,586,661 Cost of sales (155,332) (393,337) (1,141,283) (1,689,952) Gross profit 3,331,022 2,383,103 6,182,584 11,896,709 Gross profit percentage 96% 86% 84% 88% (c) Other segment information (i) Segment revenue There are no sales between segments. The revenue from external parties reported to senior management is measured in a manner consistent with that in the consolidated income statement. (ii) Management Gross Profit The senior management assesses the performance of the operating segments based on a measure of gross profit. (iii) Segment assets Assets are not reported to the chief operating decision maker by segment. All assets are assessed at a consolidated entity level. (iv) Segment liabilities Liabilities are not reported to the chief operating decision maker by segment. All liabilities are assessed at a consolidated entity level. 19
Notes to the consolidated financial statements 9. Income tax Income tax expense is recognised based on management s estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the 6 month period ended 30 June 2017 is 30%. Numerical reconciliation of income tax expense to prima facie tax payable: 30 June 2017 30 June 2016 $ $ Profit from ordinary activities before income tax: Continuing operations 3,597,973 5,984,607 Income tax calculated at 30% 1,079,392 1,795,382 Tax effect of amounts that are not deductible/(taxable) in calculating income tax: Employee option plan (47,957) 172,200 Research and development tax credit - (72,000) Other 50,741 (76,637) Subtotal 1,082,176 1,818,945 Differences in overseas tax rates (352,589) (383,961) Previously unrecognised tax losses now recouped to reduce current tax expense (88,126) (136,657) Tax losses not brought to account 397,709 - Total income tax expense 1,039,170 1,298,327 10. Business combinations 10.1 Current period acquisition - Fashiola On the 2 nd of March 2017, Mitula Group acquired 100% of the issued share capital of Kleding BV, a company in the Netherlands. The total purchase consideration was approximately $15 million ( 10.9 million) which was primarily funded by cash reserves ($13.7 million) as well as the issue of 1 million new shares in Mitula Group Limited. Kleding operates 16 fashion vertical search sites under the Kleding.nl brand in The Netherlands and the Fashiola brand in Denmark, Australia, United Kingdom, Germany, Austria, Sweden, France, Poland, Italy, Switzerland, Brazil, Spain, Portugal and Belgium (French and Dutch sites). The sites aggregate over 18 million products from 1,000 different online stores across men s and women s clothes, shoes and accessories. Visitors to these sites select an item they are interested in and then click out to the originating online store. These click outs are monetised on a cost per acquisition bases whereby Kleding receives a percentage of the total spend by the user on the destination site during the first 30 days from the click out. The Kleding.nl and Fashiola sites also provide display advertising opportunities for fashion brands to reach their highly targeted and relevant audience. Profit contribution of Kleding is $458,296 from the date of incorporation into the Mitula Group (4 months starting on March 2017) to 30 th June 2017. 20
Notes to the consolidated financial statements a) Purchase consideration Cash 14,130,856 Issued of new shares 890,000 Total purchase consideration 15,020,856 The assets and liabilities acquired are as follows: Cash and cash equivalents 481,379 Other assets 122,876 Trade and other receivables 959,006 Other intangible assets 69,187 Plant and equipment 8,481 Trade and other payables (174,958) Tax liabilities (73,789) Other payables (27,076) Net assets 1,365,106 Goodwill 13,655,750 Net assets acquired 15,020,856 b) Initial accounting The net asset value has been assessed as at 28 February 2017. The acquisition accounting and associated goodwill remains preliminary and the allocation of the Goodwill will be finalized within 12 months of the acquisition date. c) Purchase consideration cash outflow $ Outflow of cash to acquire subsidiary, net of cash acquired Cash consideration 14,130,856 Less cash balance acquired (481,379) 13,649,477 10.2 Prior period acquisition Dot Property On 2 September 2016, the Group acquired 100% of the issued share capital of Dot Property Private Limited. Dot Property operates 10 property portals across 9 South East Asian countries. Details of this business combination were disclosed in Note 16 of the Group`s annual financial statements for the year ended 31 December 2016. The net asset values and allocation of purchase price to acquired assets remains preliminary and will be finalized within 12 months of the acquisition date. $ $ 21
Notes to the consolidated financial statements 11. Reserves 30 June 31 December 2017 2016 $ $ Share-based payments 1,328,077 1,603,535 1,328,077 1,603,535 Share-based payments Opening balance 1,603,535 574,000 Exercised (59,873) - Expense recognized / (derecognized) through the income statement (215,585) 1,029,535 Closing balance 1,328,077 1,603,535 During the period, the share-based payment expense has been adjusted to reflect the fact that some performance conditions are not expected to be met. 12. Contributed equity (a) Share capital 30 June 2017 Notes Number of shares $ Ordinary shares Ordinary shares fully paid 12b) 214,233,142 33,086,776 (b) Movements in ordinary share capital Date Details Note s Number of shares Issue price $ $ 1 January 2015 Opening balance 3,436 1.49 5,121 11 March 2015 Incorporation of Mitula Group 12 1.00 12 24 March 2015 Share split 340,164 - - 17 April 2015 Capital reorganization 171,456,400 - (5,121) 1 July 2015 New shares issued 19,360,000 0.75 14,520,000 1 July 2015 New shares convertible notes holders 13,000,000 0.75 9,750,000 1 July 2015 New shares Lokku vendors first option 800,000 0.75 600,000 30 September 2015 New shares Lokku vendors second option 3,777,677 0.98 3,683,235 208,737,689-28,553,247 Transaction costs on share issue - - (1,323,035) Closing balance 208,737,689-27,230,212 1 January 2016 Opening balance 208,737,689-27,230,212 16 March 2016 New shares Nuroa vendors 81,512 0.97 79,067 2 September 2016 New shares Dot Property vendors 4,349,213 1.11 4,827,624 Closing balance 213,168,414-32,136,903 22
Notes to the consolidated financial statements 3 March 2017 New shares Kleding vendors a) 1,000,000 0.89 890,000 25 May 2017 Issue shares CEO b) 64,728 0.93 59,873 214,233,142-33,086,776 a) Pursuant to the terms of the acquisition agreement between the Group and Kleding Vendors. The Kleding Vendors received 1,000,000 shares at price of $0.89 per share on 3 March 2017. b) On 25 May 2017 the issue of 64,728 new shares was approved by shareholders at the Company`s Annual General Meeting. This represents a share-based payment salary for the CEO. 13. Dividends The Company is not proposing to pay dividends. There are no dividend or distribution reinvestment plans in operation. 14. Earnings per share The Group presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares. The calculation of earnings per share was based on the information as follows: (a) Basic and diluted earnings per share 30 June 2017 30 June 2016 Cents per share Cents per share Basic Diluted Basic Diluted From continuing operations attributable to the ordinary equity holders of the company 1.20 1.18 2.24 2.21 (b) Weighted average number of shares used as denominator 30 June 2017 Number 30 June 2016 Number Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 213,842,471 208,785,238 Weighted average of potential dilutive ordinary shares: - options 2,800,000 2,800,000 23
Notes to the consolidated financial statements Weighted average number of shares used as denominator in calculating diluted EPS 216,642,471 211,585,238 15. Contingencies There are various claims that arise in the ordinary course of business against Mitula and its subsidiaries. The amount of any additional liability (if any) at 30 June 2017 cannot be ascertained and Mitula Limited believes that any resulting liability would not materially affect the position of the Group. 16. Events occurring after the reporting period No matters or circumstances have arisen since the end of the half year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in financial years subsequent to the half year ended 30 June 2017. 24
Notes to the consolidated financial statements In the Directors opinion: (a) the interim financial statements and notes set out on pages 7 to 25 are in accordance with Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and (ii) giving a true and fair view of the consolidated entity s financial position as at 30 June 2017 and of its performance for the 6-month period ended on that date, and (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors. Simon Baker Chairman Dated this 9 th August 2017 25
Independent auditor's review report to the shareholders of Mitula Group Limited Report on the Half-Year Financial Report We have reviewed the accompanying half-year financial report of Mitula Group Limited (the Company), which comprises the consolidated balance sheet as at 30 June 2017, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the half-year ended on that date, selected explanatory notes and the directors' declaration for Mitula Group Limited (the consolidated entity). The consolidated entity comprises the Company and the entities it controlled during that half-year. Directors' responsibility for the half-year financial report The directors of the Company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement whether due to fraud or error. Auditor's responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Australian Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including giving a true and fair view of the consolidated entity s financial position as at 30 June 2017 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of Mitula Group Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Independence In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. PricewaterhouseCoopers, ABN 52 780 433 757 2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation.
Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Mitula Group Limited is not in accordance with the Corporations Act 2001 including: 1. giving a true and fair view of the consolidated entity s financial position as at 30 June 2017 and of its performance for the half-year ended on that date; 2. complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. PricewaterhouseCoopers Jon Roberts Melbourne Partner 9 August 2017